In this article, we will look at the 13 Most Undervalued Retail Stocks to Invest In.
CNBC reported on September 19 that retail companies are employing a “tariff arbitrage strategy” in their supply chains as a means to keep costs down for consumers and reduce tariff bills. The trend is exhibiting in retail companies ranging from lower-value goods to the luxury sector through the B2B2C (business-to-business-to-consumer) business model.
With President Trump’s trade war affecting the retail sector, this adopted business model entails the rerouting of consumer purchases through a middle company acting as a merchant of record. The retail middlemen purchase the product from the retailer at a wholesale price, and ship and pay the US tariff on behalf of the retailer.
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CNBC reported that Antony Talbot, group trading director for U.K.-based accessible curve fashion retailer Yours Clothing, said that the B2B2C model managed to reduce the company’s tariff costs by half.
“The North American retail market is very important to us and we don’t want to upset our customers,” he stated. “If we increased our prices, our customers would not be able to afford it, and it would push us up into a different price category, which is very competitive. That is not what our business model is about. We are analyzing where we can cut to offset the increase in costs.”
With these trends in view, let’s look at the most undervalued retail stocks to invest in.
Our Methodology
We used stock screeners to make a list of the best retail stocks with a forward P/E below 20 and selected the top 13 with the highest number of hedge fund holders as of Q2 2025, sourcing the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund holders.
Note: All data was sourced on October 3.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
13 Most Undervalued Retail Stocks to Invest In
13. Caleres, Inc. (NYSE:CAL)
Forward P/E: 7.84
Number of Hedge Fund Holders: 21
Caleres, Inc. (NYSE:CAL) is one of the most undervalued retail stocks to invest in. Caleres, Inc. (NYSE:CAL) reported its fiscal Q2 2025 results on September 4, with reported consolidated sales of $658.5 million, down 3.6% versus the prior year. Brand Portfolio sales also dropped 3.5%.
However, the company experienced gains in women’s fashion footwear market share and strong performance from Lead Brands in total, with a tariff impact of around $10 million.
Management further reported that Famous Footwear sales declined 4.9%, with comparable sales down 3.4%.
Following the earnings release, KeyBanc analyst Ashley Owens maintained a Hold rating on Caleres, Inc. (NYSE:CAL) on September 5 without assigning a price target.
Caleres, Inc. (NYSE:CAL) is a global footwear retailer that operates shoe stores and e-commerce websites. It sources, designs, develops, manufactures, and distributes footwear for people of all ages, and operates through the Brand Portfolio and Famous Footwear segments.
12. Guess?, Inc. (NYSE:GES)
Forward P/E: 10.78
Number of Hedge Fund Holders: 24
Guess?, Inc. (NYSE:GES) is one of the most undervalued retail stocks to invest in. UBS raised the firm’s price target on Guess?, Inc. (NYSE:GES) to $16.75 from $13 on August 28, keeping a Neutral rating on the stock with the firm moving its target to the take-private transaction price.
Similarly, Telsey Advisory raised the firm’s price target on Guess?, Inc. (NYSE:GES) to $16.75 from $13 on August 21 while keeping a Market Perform rating on the shares.
The firm told investors that it is updating its price target after Guess?, Inc. (NYSE:GES) announced its go private agreement with Authentic Brands, valued at $1.4 billion.
Guess?, Inc. (NYSE:GES) is involved in the design, marketing, licensing, and distribution of contemporary apparel and accessories for women, men, and children.
The company’s operations are divided into the following segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing.
